Large swings in energy prices account for most of the divergence between CPI and the core measure in recent years. Steep declines in energy prices since the middle of last year widened the gap between overall and core inflation. Increases in energy prices in February and March narrowed the gap, but declining energy prices in April sent the all items CPI and core measures in opposite directions again.

A “real” rent index can be constructed to indicate whether the inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the “real” rent index rises (declines). The “real” rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile energy component).

After declines during the recession, inflation in real rents accelerated from 2012 to 2014, a period of strong recovery in the multifamily sector, reaching a peak average annual rate of 1.7% in 2014. Real rent inflation has slowed in 2015, averaging 1.0% from January to April.